Europe ends mixed; telecoms in focus

Serono, Schering surge on Elan drug suspension

KabirChibber

LONDON (MarketWatch) -- European shares ended mixed Monday, with telecommunications stocks uneven after Spanish carrier Telefonica posted higher 2004 profits and France Telecom named a new chief executive to replace Thierry Breton, who agreed to be France's finance minister.

Drugmakers Serono and Schering gained after the Irish pharmaceutical Elan and Biogen Idec suspended the marketing of their Tysabri multiple sclerosis drug. See full story.

The German DAX Xetra 30 index finished up 0.04 percent to 4,350 while France's CAC 40 index (1804546) inched down 0.2 percent to 4,027. The French benchmark index is hovering around the highs of June 2002.

U.S. shares traded lower, with Elan and Biogen plunging on the marketing suspension. See Market Snapshot.

The dollar was weaker against other major currencies, pressured by better-than-expected Japanese production and sales data. See currencies story.

Shares of France Telecom
FTE, -1.27%
(013330) ended down 1.8 percent after the carrier said Didier Lombard, formerly a senior executive vice-president at the company, will succeed Breton.

Deutsche Bank said Breton's departure "is likely to increase the short-term uncertainty at France Telecom, but we believe this is unfounded." The broker said Lombard's appointment sent the message of "no change."

Breton, known as a capable cost cutter, becomes the fourth finance minister in France in about a year. Analysts expected President Jacques Chirac to appoint an experienced political hand to usher though reforms. See story

Telefonica
TEF, -0.30%
shares finished down 1.4 percent in choppy Madrid trade. It said net income rose 30.6 percent to 2.88 billion euros. Excluding the effect of its ongoing redundancy program, it said net income would have risen 6.3 percent to 3.29 billion euros.

Operating revenues rose 6.8 percent to 30.3 billion euros, boosted by 15.6 percent growth in its cellular business and hit 2.4 percentage points by exchange rates. It proposed raising its dividend by 25 percent to 50 eurocents a share.

Schering and Serono both make rival drugs to Tysabri. See Tysabri story. Pharmaceuticals peer Bayer
BAY, +9.09%
(575200) shed 0.8 percent, after early gains, as J.P. Morgan raised its rating to "overweight" from "neutral," citing expectations for a recovery in Material Science as well as Bayer's drug pipeline.

"We believe 2005 will be characterized by strong earnings in the Material Science business and significant newsflow on Bayer's drugs pipeline," the analysts told clients. The broker lifted its 2005 outlook for earnings ahead of exceptional items by 8 percent to 1.83 euros per share. J.P. Morgan lifted its 2006 estimates by 21 percent to 2.17 euros a share.

Carmakers were lower as crude oil futures hovered near $52 a barrel. Orin Middleton, an energy analyst at Barclays Capital, said: "It is hard to argue we are reaching a technical plateau."

Sports car maker Porsche (693773) shares added 1.2 percent after reiterating that it's on track to sell 80,000 vehicles during its fiscal year and saying it expects earnings to remain high and revenue to rise.

Infineon declines

German memory chip maker Infineon Technologies
IFX, -4.44%
(623100) fell 2.4 percent as it was downgraded to "reduce" from "hold" by Dresdner Kleinwort Wasserstein on a 22 percent fall in D-Ram semiconductor chip prices in February and its recent rally in share price.

"We expect the D-Ram price collapse to continue causing losses and a weaker balance sheet. D-Ram prices are falling fast in line with our expectations and we fear that the end is not close by," the broker commented.

French industrial gases group Air Liquide (012007) fell 1.5 percent as its results were weaker than expected and there were worries about margin pressures.

Net profit in 2004 rose 7.1 percent to 778 million euros, with growth in emerging countries in Asia, and renewed momentum in its U.S. markets and healthcare in Europe. It sees 2005 earnings growth at least matching 2004 levels.

Deutsche Bank said the results were 1 percent below its expectations. "Looking at the second half of 2004, the underlying margin decline... has actually worsened," the broker said.

But it said the stock was "cheap" relative to its history and Air Liquide's capital discipline, and so it retained its "hold' recommendation.

Deutsche Boerse (581005) finished up 0.5 percent, after being down over 1 percent. The Financial Times said dissident shareholders, who opposed the German exchange's proposed bid for the London Stock Exchange (LSE), have approached the chairman of the Swiss stock exchange group SWX to replace CEO Werner Seifert.

One analyst in Frankfurt told MarketWatch there is "absolutely" no chance this will derail the proposed bid.

"Only 15 percent of shareholders have officially announced opposition to a takeover of the LSE," he said, well below what is needed to stop Seifert.

French software and services group Dassault Systemes
DASTY, +0.98%
(013065) finished down 1.8 percent after Morgan Stanley cut its rating to "underweight" from "equal weight," citing growth concerns, valuation as well as investment in distribution.

"Dassault has benefited from lackluster competition in the last two-three years, particularly for its high-end products," the broker said, adding "Dassault's newer products look less secure to us now."

Iberia Lineas Aereas (014720003) was flat at the close as the Spanish airline's 2004 net profit climbed to 220 million euros, topping expectations of 174 million euros to 195 million euros, AFX News said.

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